I was speaking to a fellow investor friend of mine today and he asked: “What are your show stoppers for rental purchases?” Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free What he was referring to were those things on a property that will kill the deal when it’s already under agreement. We had an interesting discussion on it, and I found that his list and other investors’ lists of deal killers were very different. So, let’s discuss. What Keeps Investors From Going Through With a Deal? Reasons to Exit a Rental Purchase 1. Condition With regard to larger multifamilies these days, the fact is, no one is out there selling properties in great shape, where all their tenants are paying their rent on time. They’re all in rough condition. If you want a good price on something, you’re going to be subjected to properties that are in disarray to some extent or have tenant issues. Just adjust your offer price accordingly. 2. Hazards Hazards may include things such as lead-based paint. A lot of investors won’t touch properties that have this. But I have coverage in my insurance policy for this. We do our best to incapsulate lead-based paint, we educate our tenants, and we have them read and sign documents warning them about this issue. Unfortunately, the cost of remediating this is not economically feasible, so we incapsulate in our units to the best of our ability. Just make sure your insurance policy has a rider in there for it. It comes down to risk tolerance. 3. Aluminum Wiring Many investors freak out if they find out a property has aluminum wiring. This happened to me. I purchased a deal that a previous buyer backed out on for this reason, but I talked to my insurance company and you can get insured for it. There are certain remediations that you do to remediate that hazard, certain outlets and switches. They way, way knock down the risks of aluminum wiring. 4. Tenants I consider the people that come along with a property purchase, and I consider the rent that they’re paying, but there’s other factors that I’d consider before not buying a place because of tenants. If they’re paying below market rate, that can be remediated. But the tenants themselves are not a liability. As long as there’s not some sort of zoning restriction or deed restriction—in which case I wouldn’t buy because it would inhibit how you’re allowed to use the property—this wouldn’t be a no-go for me personally. But if you have to involve court or politicians to rezone property for you, no thanks. 5. Layout Have you heard the term “functionally obsolete”? This means that, back in the day, a 10-foot by 10-foot living room was OK. But now you’d have a major problem leasing units with really small bedrooms or living rooms. There’s something called a “rooming house,” as well. This is where kitchens and bathrooms are shared by many people. They’re not as common today, but in places where they are still allowed, I would never buy one. Only a small percentage of the population wants something like this. Another thing I’d steer clear of is property that used to be one thing but was cut up and is not something different. It could be a single family home that was cut into a duplex or a four-, five-, or six-unit that used to be a single family home. I try to stay away from those. Bottom line, if something is immovable, I can’t work with it for one reason or another, I’m probably not going to buy it. Dollars and effort can’t change it. Related: 3 Ways to Make a Stellar Real Estate Deal Out of an Average Deal 6. Location If you’re thinking to yourself, “If I could pick up this property with a helicopter and drop it into a new location, I’d buy it.” Don’t. If it’s not a location you’d want to work in for a variety of factors, this is not a property for you. That helicopter doesn’t exist yet. Locations I’d avoid include those with very high crime. General crime exists. But if it’s red anywhere around the property on Trulia, I won’t do it. If you don’t want to send your people there or go there yourself, there’s plenty of money to be made in other neighborhoods. 7. Income You need to consider your goals for the property. What’s the return you want to make? If the median income in the area is $15,000, if you do the math, someone making that income can’t afford that rent. So, look at that figure and ensure someone making the median income would probably pass as a tenant applying for your property. Again, this is an immovable thing. You can’t change it. The Bottom Line My “show stoppers” all have to do with things I can’t change. I can remove a bad tenant, I can repair issues with the property condition, and I can work around hazards like lead-based paint. I can’t change other factors of the property, and those are my show stoppers. Watch the video above, where I go into further detail about what they are. Have a great and profitable week! Do you have some “show stoppers” of your own that I haven’t mentioned? Leave them in the comment section below.